Dercylidas first appears in the spring of 411, during the Great Peloponnesian War, when he was sent to the Hellespont to try and stir up revolts against Athenian authority. He was able to stir up revolts in Abydos and Lampsacus, on the Asian side of the Dardanelle, although the Athenian commander Strombichides was quickly able to retake Lampsacus.

Dercylidas served as harmost of Abydos while Lysander was in command of the Spartan war effort. During this period he was humiliated by the Persian satrap Pharnabazus, having had to stand guard duty with his shield as a result of a report from the satrap.

He next appears in 399, during the Persian-Spartan War. The first Spartan commander in Asia Minor, Thibron, was considered too lax, and he was replaced by Dercylidas.

His first act was to arrange a truce with the satrap Tissaphernes so that he could concentrate his efforts against the hated Pharnabazus. In his first campaign in Aeolis he is said to have captured nine cities in eight days, and taken the treasure of Queen Mania, a recently murdered satrap of Dardanus. At the end of the campaigning season of 399 he arranged a truce with Pharnabazus and spent the winter of 399-398 campaigning in Bithynia.

In the spring of 398 he moved to Lampsacus, where he met commissioners from Sparta who confirmed him in his post for another year, and commented on the superior discipline of the army under his command compared to that of Thibron.

The commissioners also informed him that the Greek communities of the Thracian Chersonese (Gallipoli) were asking for aid against the Thracians. Dercylidas crossed over to the Chersonese and built a wall across the peninsula to protect its inhabitants against raids. He then crossed back into Asia and besieged Atarneus, then held by a group of Chian exiles.

In 397 the Ionian Greeks sent ambassadors to Sparta asking for help against Tissaphernes and suggesting that a Spartan attack on his lands in Caria might convince the satrap to acknowledge the independence of the Ionian Greeks. Dercylidas was ordered to carry out this invasion and led his troops against Tissaphernes.

This triggered a rare period of cooperation between the satraps. The Spartans found themselves facing the combined forces of Tissaphernes (recently appointed overall commander in the area) and Pharnabazus, but no battle took place. Tissaphernes had been at Cunaxa, and had no interest in attacking a strong force of hoplites in a good defensive position. Instead peace talks began, although neither side appears to have been interested in making any confessions. Dercylidas demanded that the Persians should leave the Greek cities of Asia Minor alone, while the Persians demanded that the Spartans should withdraw their troops and their governors from the area. Both sides then agreed to put these terms to their home governments.

During this brief truce news reached Sparta of a Persian plan to prepare a fleet of 300 triremes in Phoenicia. In response Agesilaus II was sent to Asia Minor at the head of a sizable army. Dercylidas remained in Asia long enough to act as one of three commissions during Agesilaus's brief truce with Tissaphernes. He served under Agesilaus for a brief period after this, and took part in an successful ambush of Mysians who had attempted to attack his column in some narrow valleys. He then returned to Sparta.

In 394 he was sent to bring the news of the fighting around Corinth and the inconclusive Spartan victory at the battle of Nemea to Agesilaus (Corinthian War). He caught up with the king at Amphipolis during his march back into Greece from Asia Minor. Dercylidas then agreed to carry the same news to Sparta's allies in the area. Shortly afterwards the Spartan fleet was destroyed at Cnidus, and many of Sparta's allies in Asia Minor and the Hellespont area changed sides. One of the few exceptions was Abydos, where Dercylidas was able to maintain Spartan control.

Dercylidas was said to have been rough but cunning, unmarried, and very happy to be away from Sparta.